Mid term Exam 1 2122

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Seneca College *

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147

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Economics

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Feb 20, 2024

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Mid term Exam 1 1. Economic Models and Consumer Behavior  Which concept is foundational to understanding how consumers make choices under constraints? a) Marginal cost b) Opportunity cost c) Utility maximization d) Price elasticity 2. Market Structure and Competition  In a perfectly competitive market, what assumption is made about the number of buyers and sellers? a) Only a few sellers dominate the market. b) One seller controls the entire market. c) Buyers have more power than sellers. d) There are many buyers and sellers, with no single entity able to control prices. 3. Risk and Decision Making  Which principle best describes the behavior of a risk-averse individual in decision-making under uncertainty? a) Maximization of expected value b) Minimization of variance c) Maximization of expected utility d) Indifference to outcomes 4. Game Theory and Strategic Interaction  What does the concept of the Prisoner's Dilemma illustrate in game theory? a) Cooperative behavior always leads to the best collective outcome. b) Non-cooperative behavior can lead to worse outcomes for all participants. c) Communication between players always leads to cooperation. d) Players have no incentive to cooperate even when it seems beneficial. 5. Public Goods and Externalities  Which of the following is a characteristic of public goods? a) Excludability b) Rivalry in consumption c) Non-excludability d) High cost of provision 6. Supply and Demand Analysis  What effect does a government-imposed price ceiling below the equilibrium price have on a market? a) It increases the supply of the good. b) It decreases the demand for the good. c) It creates a surplus. d) It creates a shortage. 7. Inflation and Monetary Policy  Which entity is primarily responsible for controlling inflation through monetary policy? a) The government b) The central bank c) Commercial banks d) International financial institutions 8. Fiscal Policy and Government Spending  How does expansionary fiscal policy affect the economy? a) By reducing government spending and taxes b) By increasing government spending and/or decreasing taxes c) By increasing taxes only d) By decreasing the money supply 9. Labor Market and Employment  What is the natural rate of unemployment associated with? a) Cyclical factors b) Frictional and structural unemployment c) Inflationary pressures d) Deflationary trends 10. Capital Markets and Investment

 Which factor is considered most influential in determining the price of bonds in the market? a) The stock market trends b) The bond's rating by credit agencies c) Changes in interest rates d) The issuing company's profit margins

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